Norway has avoided the fate of a number of other commodities economies thanks to a predictable monetary policy and a fund that invests the nation’s energy wealth offshore, central bank Governor Oeystein Olsen said.
“The krone clearly responds to oil price shocks,” Olsen said in a speech posted on the bank’s website today. “However, compared with other commodity-based economies, like Canada, Australia and New Zealand, fluctuations in the real exchange rate have been moderate.”
Norway, Western Europe’s biggest oil and gas exporter, has channeled its energy wealth into the nation’s $700 billion sovereign wealth fund, the world’s biggest. The fund’s strategy of investing abroad has allowed the Scandinavian nation to avoid the kind of economic swings that generally plague commodities- reliant nations, Olsen said.
Still, Norway’s fiscal health and economic outperformance turned it into a haven from Europe’s debt crisis. The krone soared to a record high on a trade-weighted basis in February and has surged more than 20 percent against the euro since early 2009, keeping inflation below the central bank’s 2.5 percent target since 2009 and hurting exporters.
Olsen, who held the bank’s benchmark rate at 1.5 percent last month, has signaled he is ready to cut rates further to stem the krone’s appreciation. Policy makers have kept rates near a record low for 12 months after cutting them twice in 2011 and 2012.
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